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Appeared on: Saturday, August 12, 2006
Stalemate seen in high-definition DVD war

The battle between two hyped formats for high-definition DVD will confuse shoppers and turn many of them off the whole technology, a London-based research firm predicted on Friday.

Market research analyst Screen Digest also forecast that only $11 billion of the total $39 billion expected to be spent on video discs by 2010 in the United States, Europe and Japan will be generated by the competing high-definition formats, Sony Corp.-backed (6758.T) Blu-ray and Toshiba-supported (6502.T) HD-DVD.

"The net result of the format war and the publicity it has generated will be to dampen consumer appetite for the whole high definition disc category," Screen Digest analyst Ben Keen said.

The DVD format exploded into a multi-billion-dollar global industry for movie and TV studios in large part because the largely universal format delivered a more convenient way to own movies than its predecessor, the VHS videotape.

"This time both formats support similar features," said Graham Sharpless, who wrote the report.

The new formats are being introduced just as DVD sales level off, after consumers built up libraries of their favorite movies and TV shows at deeply discounted prices.

Electronics retailers, such as Best Buy and CompUSA are frustrated by the raging format war, fearful of another decade-long tussle similar to the one between VHS and Betamax. They have been predicting a lackluster Christmas selling season, expecting consumers to wait for one format to win out.

Screen Digest predicts that the two formats will co-exist until a combined solution becomes cost-effective, rather than taking the view that one will emerge victorious or that both will flop so badly as to be driven into extinction.

All of the Hollywood studios, except Universal, have said they will release movies on Blu-ray, with the first players and titles having launched earlier this year.

While only three of the major studios have said they will release movies in HD-DVD, Microsoft Corp. (Nasdaq:MSFT - news) has thrown its weight behind the format, supporting it in the Windows Vista PC operating system and offering an external drive to connect to its Xbox 360 game console.

Sony is incorporating Blu-ray into its Playstation 3 video game console, due out later this year, to push its format into more homes.

Screen Digest expects that 430,000 standalone Blu-ray and HD-DVD players and recorders will be sold in 2006 and 1.35 million in 2007.

By 2010, it expects about 15 million U.S. households (21 percent of homes with high-definition TV sets), 10 million in Europe (17 percent) and 2.5 million (7.4 percent) in Japan will have bought a standalone unit, while 24 million, 23 million and 15 million hi-definition disc enabled games consoles will have been sold.

As standalone units, a Samsung Blu-ray player sells for about $1,000 and a Toshiba HD-DVD player for about $500.